Ge Webcast Presentation 04172009

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Ge Webcast Presentation 04172009

  1. 1. GE 2009 first quarter performance April 17, 2009 – Financial results & company highlights quot;Results are preliminary and unaudited. This document contains “forward-looking statements”- that is, statements related to future, not past, events. In this context, forward-looking statements often address our expected future business and financial performance and financial condition, and often contain words such as “expect,” “anticipate,” “intend,” “plan,” believe,” “seek,” “see,” or “will.” Forward-looking statements by their nature address matters that are, to different degrees, uncertain. For us, particular uncertainties that could cause our actual results to be materially different than those expressed in our forward-looking statements include: the severity and duration of current economic and financial conditions, including volatility in interest and exchange rates, commodity and equity prices and the value of financial assets; the impact of U.S. and foreign government programs to restore liquidity and stimulate national and global economies; the impact of conditions in the financial and credit markets on the availability and cost of GE Capital’s funding and on our ability to reduce GE Capital’s asset levels and commercial paper exposure as planned; the impact of conditions in the housing market and unemployment rates on the level of commercial and consumer credit defaults; our ability to maintain our current credit rating and the impact on our funding costs and competitive position if we do not do so; the soundness of other financial institutions with which GE Capital does business; the adequacy of our cash flow and earnings and other conditions which may affect our ability to maintain our quarterly dividend at the current level; the level of demand and financial performance of the major industries we serve, including, without limitation, air and rail transportation, energy generation, network television, real estate and healthcare; the impact of regulation and regulatory, investigative and legal proceedings and legal compliance risks; strategic actions, including acquisitions and dispositions and our success in integrating acquired businesses; and numerous other matters of national, regional and global scale, including those of a political, economic, business and competitive nature. These uncertainties may cause our actual future results to be materially different than those expressed in our forward-looking statements. We do not undertake to update our forward- looking statements.” “This document may also contain non-GAAP financial information. Management uses this information in its internal analysis of results and believes that this information may be informative to investors in gauging the quality of our financial performance, identifying trends in our results and providing meaningful period-to-period comparisons. For a reconciliation of non-GAAP measures presented in this document, see the accompanying supplemental information posted to the investor relations section of our website at www.ge.com.” “In this document, “GE” refers to the Industrial businesses of the Company including GECS on an equity basis. “GE (ex. GECS)” and/or “Industrial” refer to GE excluding Financial Services.”
  2. 2. Overview Global environment remains challenging GE navigating through recession + Aggressive cost out + Backlog holding + Solid cash flow + GE Capital safe & secure 1Q’09 earnings consistent with March update + Infrastructure/media earnings flat + Capital Finance segment profit of $1.1B Running GE for the long term + Investing in growth Preliminary 2009 first quarter results/2
  3. 3. Environment Economic downturn continues Positive signs – Global recession + Parts of the globe still robust … China, Middle East, Latin America – Unemployment continues to increase + Broad deflation will help margins – Capital markets improving, but + Customer usage helps services still some volatility growth – Commercial credit cycle will be + Stimulus starting to take hold difficult – Weak consumer/business confidence Continued caution Preliminary 2009 first quarter results/3
  4. 4. 1Q’09 operational update Status Aggressive cost out + 1 Drive orders where available … + 2 protect backlog + position for stimulus Solid Industrial cash flow 3 Safe & secure GE Capital 4 5 Resolved credit ratings – Preliminary 2009 first quarter results/4
  5. 5. Aggressive cost out ($ in billions) Base cost Indirect cost $44 $41 $40 $24 $22 $21 Restructuring Deflation (7)% Headcount Lower spend Lower spend '08 '09E '08 '09E Direct material Margins $53 $51 $50 + 15.6% Deflation Infrastructure + Exchange Value gap + Supply chain NBCU/Healthcare – '08 '09E '08 '09E Increased cost out goals since beginning of year Preliminary 2009 first quarter results/5
  6. 6. Orders solid in 1Q … $19B, (10)% Preserving backlog ($B) Equipment Services 4Q’08 1Q’09 4Q’08 1Q’09 $172 $171 $161 Energy –% (36)% –% 4% $130 50 51 51 O&G (19) 2 2 (5) 36 Equip. Aviation (26) (4) 9 18 110 121 121 Healthcare (6) (11) 1 (2) CSA 94 Transportation (48) (60) (10) 19 Ent. Solutions (8) (28) 38 (2) 1Q'07 1Q'08 4Q'08 1Q'09 Total (11)% (21)% 2% 7% Highlights Initiatives Energy Infra. $4.3B equipment, $4.1B services Services +7% – Equipment: Wind $1.7B (8)%, Thermal $1.1B (53)% – Aviation Commercial spares +10%, overhauls +14% – Energy Services’ orders $2.5B, +5% – Energy Wind services +25% Technology Infra. $5.9B equipment, $4.9B services Global … 57% orders from outside the U.S. – Aviation Military $1.5B, +61% – Healthcare China +23%, Japan +21% – Transportation services $0.8B, +19% driven by – O&G W2E China project $362MM Parts and Signal services Preliminary 2009 first quarter results/6
  7. 7. Stimulus Target countries GE focus $2T U.S. Stabilize Wind backlog/accelerate global growth + U.S. projects being executed (Invenergy) + China acceleration Canada Accelerate green energy investing … Smart Grid China + A one million population city = $500MM of GE content Japan Increase/solidify Infrastructure projects Brazil + China Rail … Iraq Turbine U.K. Accelerate targeted Healthcare spending + Healthcare IT … U.S. France + Equipment … Middle East, France, China Germany Offset/encourage innovation investment Announced + U.S. … “green” appliances, batteries Middle East + Global … R&D offsets Dedicated team and process in place Aggressive export finance to support backlog … EXIM, COFAS Several projects in 2Q’09 Targeting $100B+ in opportunity GE well positioned Preliminary 2009 first quarter results/7
  8. 8. Cash flow on track ($ in billions) 1Q CFOA GE cash balance walk Historically ~18% of FY cash $4.9 flow in 1Q Total GECS 1.1 dividend V% Beginning balance $12.1 $2.8 (42)% CFOA 2.8 3.8 Industrial (24)% Dividends (3.3) P&E (0.8) 2008 2009 GECS capital contribution (9.5) • No GECS dividend (down $1.1B vs. ’08) • Working capital improvements offset Change in debt/other 0.8 progress collections • Contributed $9.5B to GECS & returned $3.3B to shareowners as dividends March 2009 $2.1 • Industrial CFOA 1.6X Industrial earnings 1Q Industrial CFOA on plan Consolidated cash $47B Preliminary 2009 first quarter results/8
  9. 9. Safe & secure GE Capital ($ in billions) Long-term funding Commercial paper $102 $84–a) $72 $45 $42–a) $58 2008 2009 plan 1Q’09 YTD 1Q’08 4Q’08 1Q’09 (a- includes $13B ’09 pre-funding in ‘08 Total company cash GECC TCE/TA–c) GECC leverage–b) 7.4:1 $48 6.6% 7.1:1 $47 6.0:1 4.9% 4.9% $15 1Q'08 4Q'08 1Q'09 1Q'08 4Q'08 1Q'09 1Q'08 4Q'08 1Q'09 (b- net of cash & equivalents with hybrid debt (c- tangible common equity/tangible assets as equity ex. noncontrolling interests Have funded 93% of long-term debt, reduced CP … solid capital ratios Preliminary 2009 first quarter results/9
  10. 10. Credit rating update 10 largest market caps on Dow S&P downgraded 10 financial S&P rating today institutions in Dec. ’08, placed GE on AAA AA negative outlook … Moody’s put GE under review in January S&P updated GE’s long-term rating to AAA AA- AA+ with ‘stable’ outlook on Mar. 12 “Rating of AA+ indicates a very strong capacity to meet its financial commitments. AAA AA- Stable outlook means rating is unlikely to change in next 6 months to 2 years” A+ AA+ Moody’s updated GE’s long-term rating to Aa2 with ‘stable’ outlook on Mar. 23 “Obligations of Aa2 judged to be of high quality & subject to very low credit risk” AA A No change in short-term ratings GE retains a strong, stable rating Preliminary 2009 first quarter results/10
  11. 11. 1Q’09 performance
  12. 12. 1Q’09 performance update ’09 total year 12/16/08 3/19/09 1Q’09 framework update actuals 1Q comments Energy Infra. ++ ++ +19% + Global growth Technology Infra. + + +6% + Aviation strong results ‒ Healthcare pressured NBCU 0/‒ – (45)% ‒ Advertising market weak Timing/tougher comps to 1Q’08 Infra./NBCU 0-5% 0% Capital Finance ~$5B Profitable $1.1B + Cost reductions above plan Tax credit ‒ Economic outlook worse than original framework … but consistent with 3/19 meeting Corporate Flat Flat Accelerated restructuring in 1Q ‒ Higher industrial taxes Preliminary 2009 first quarter results/12
  13. 13. First quarter consolidated results ($ in billions – except EPS) ($ in millions) Segment Continuing operations Revenues profit 1Q’09 V% $ V% $ V% Revenues $38.4 (9)% – Industrial sales 24.0 (1) Energy Infra. $8,239 7% $1,273 19% – Financial Svcs. rev. 14.4 (20) Technology Infra. 10,436 – 1,803 6 Earnings–a) 2.8 (35) EPS–b) .26 (40) NBC Universal 3,524 (2) 391 (45) CFOA YTD 2.8 (42) Infra. & Media 22,199 2 3,467 - – Industrial CFOA 2.8 (24) Capital Finance 13,088 (23) 1,119 (58) 1Q’09 C&I 2,221 (22) 36 (75) Tax rate (12)% – GE (ex. GECS) 31 – GECS Fav. $37,508 (10)% $4,622 (27)% (a- attributable to GE (b- GE earnings attributable to common shareowners Preliminary 2009 first quarter results/13
  14. 14. 1Q items (Earnings per-share) Impact Comments Transaction gains, marks $.03 Transactions in Capital Finance $.03 & & impairments Aviation ~$.03 Marks/impairments $(.03) in Capital Finance Restructuring & other items (.04) Primarily workforce & footprint reductions Taxes .02 Permanent reinvestment decision $.07 Booking to expected annual rate (GECS & GE) $(.05) $.01 1Q items mostly offset Preliminary 2009 first quarter results/14
  15. 15. GE Capital 1 Running GE Capital to be safe & 4 Capital sufficient to weather adverse secure economic conditions Liquidity position is stronger Additional capital not required Completed 93% of our ’09 under Fed adverse scenario planned long-term funding Increasing total reserves Marks & impairments lower 2 Resizing into a smaller, more than 4Q focused Capital Finance Assets down $31B from 4Q, ex. FX down $16B 5 Profitable 1Q and expect to be SG&A down $0.6B vs. 1Q’08, profitable in TY’09 on track for ~$3B in ’09 3 Tough credit cycle 6 We are committed to GE Capital Planning for higher delinquencies, provisions for losses & write offs Preliminary 2009 first quarter results/15
  16. 16. Capital Finance highlights ($ in millions) 1Q update U.S. Consumer 1Q’09 $ V% Profitable in 1Q’09 … $99MM Revenues $13,088 (23%)U.S. unemployment trending higher but losses outperforming to date … 1Q’09 $964MM Segment profit $1,119 (58%) U.K. Home Lending Assets $542B (13%)Small loss in 1Q’09 … $(73)MM Credit losses $219MM, increased reserves by $127MM HPI (2.7)% in 1Q’09, in line with updated outlook, expected to deteriorate Key 1Q business results Central & Eastern Europe Assets Segment Profitable in 1Q’09 $84MM, after credit losses of $156MM ($B) profit ($MM) Commercial Real Estate Tough environment … delinquencies rising $ V% $ V% 1Q losses/impairments $0.2B, favorable to original Consumer $165 (26)% $727 (27)% outlook, expected to worsen Commercial Lending & Leasing Real Estate 82 (5) (173) U Environment tough, non-earnings rising CLL 223 (9) 222 (68) 1Q losses/impairments $0.7B, higher than original outlook GECAS 50 6 268 (31) Profitable origination expected to accelerate in 2Q EFS 23 8 75 (44) Verticals In line … stimulus could help origination Preliminary 2009 first quarter results/16
  17. 17. Capital Finance portfolio quality Commercial Consumer 30+ delinquency Non-earners 6.81% 11.80% 10.56% Mortgage 5.47% 9.22% Mortgage 8.47% 4.59% 2.84% 7.75% 7.43% 8.20% 4.13% Delinquencies–a) 4.19% 3.74% 6.38% 2.17% 3.33% 5.66% 5.91% Total 2.74% 2.30% 2.50% 1.61% Total 1.48% 1.36% 5.62% 6.02% 2.00% 4.36% 4.34% 4.70% Non-earners Non-mortgage 2.16% 1.39% 1.75% 1.02% 1.41% Non-mortgage 0.84% 1.21% 1.29% 0.81% 1Q'08 2Q'08 3Q'08 4Q'08 1Q'09 1Q'08 2Q'08 3Q'08 4Q'08 1Q'09 1Q'08 2Q'08 3Q'08 4Q'08 1Q'09 Drivers Drivers Continued delinquency pressure across NA delinquencies stable in 1Q most portfolios +66 bps. vs. 4Q’08 … Equipment Finance +44 bps., RE +9 bps. U.K. mortgage markets deteriorate further ‒ Delinquencies up 77 bps. vs. 4Q’08 … U.K. +47 bps. Non-earners +61 bps. vs. 4Q’08 ‒ Non-earners up 86 bps. vs. 4Q’08 … U.K. +54 bps., NA +8 bps. ‒ Driven by senior secured loans … well collateralized Mortgage rates rising but exposure mitigated ‒ Total assets at $56.4B, down $5B vs. 4Q’08 … write-offs low at CRE non-earnings +81 bps. to 1.2% … 0.45% to financing receivables delinquencies +109 bps. to 2.2% ‒ Low LTV at origination of 75% & adequate coverage rate .92% (a- Equipment Financing As expected … tough environment Preliminary 2009 first quarter results/17
  18. 18. Capital Finance reserve coverage ($ in billions) Commercial $5.7 Reserves increased by $0.3B in 1Q’09 … $5.3 coverage rate to .86% Allowance – Reserves/non-earnings ratio lower but $4.3 for losses 2.0 1.7 based on asset-by-asset review … 1.2 senior secured positions & strong Comm’l. asset management Consumer 3.6 3.7 3.2 Consumer Increased coverage to 2.87% U.S. Card & Sales Finance – Coverage rate +64 bps. to 6.8% – Reserves/non-earnings 206% 1Q'08 4Q'08 1Q'09 Mortgage Reserve – Coverage rate 46% to .92% coverage 1.04% 1.42% 1.59% – Reserves/non-earnings 14% – Average LTV at origination 75% Reserve coverage up … 55 bps. vs. prior year Preliminary 2009 first quarter results/18
  19. 19. Capital Finance non-earning exposure walk ($ in billions) Consumer Commercial $5.5 (1.6) $4.5 (1.4) 3.9 (1.3) (1.0) Non- 100% mortgage recovery 220% coverage $3.2 non- (2.0) (1.2) mortgage $2.0 reserves Cure Loans in recovery/ 202% workout coverage Expect full 162% recovery/ 0.9 coverage cure Collateral (0.3) $0.5 value on 0.3 remaining exposure 1Q’09 1Q’09 1Q’09 1Q’09 Estimated Mortgage Estimated Estimated Estimated loss exposure non-earnings collateral MI loss Non-earning reserves Non-earning mortgage value exposure reserves 228% 133% coverage coverage Dec. ’08 $3.2 (1.1) (0.5) (0.8) 0.8 $1.7 $4.7 (1.4) 3.3 (1.0) (1.8) (0.2) 0.3 $0.4 Preliminary 2009 first quarter results/19
  20. 20. Capital Finance new business origination ($ in billions) Dynamics 1Q TY actual estimate ROI 1 Reduced ENI by $11B, ahead of plan, lower demand Commercial Lending $4 $41 2.5%+ & Leasing 2 Expect increased volume in 2Q … stronger pipeline Verticals 2 10 3-6% 3 Have capacity to buy distressed assets (PPIP) Consumer 25 125 2.0-2.5% 4 Expect limited mortgage originations Real Estate 1 4 3.0%+ 5 Global stimulus provides opportunity 6 Maintaining pricing discipline, leading $32 ~$180 to attractive new business ROIs First quarter volume below plan … capacity to increase lending Preliminary 2009 first quarter results/20
  21. 21. Capital Finance stress cases ($ in billions) Original Estimated Fed Estimated Fed outlook base case adverse case Pretax, pre-provision ~$13.3 ~$11.1 ~$9.2 Credit costs (9.7) (11.5) (13.7) Pretax 3.6 (0.4) (4.5) Capital Finance net earnings ~$5.0 ~$2.0-2.5 ~$0 Dynamics 1Q credit loss & impairments running to original outlook, however, leading indicators deteriorating Aggressive cost actions taken … accelerating savings 2Q through 4Q Preliminary 2009 first quarter results/21
  22. 22. Infrastructure & Media
  23. 23. NBCU highlights ($ in millions) 1Q’09 $ V% Revenues $3,524 (2)% Segment profit $391 (45)% 1st quarter dynamics 1 Cable 3 Film & Parks - Limited 1Q video releases vs. ’08 + Cable strong everywhere, USA #1 + Strong critical acclaim for Milk … wins 2 + Bravo +41%, USA +15%, Oxygen up 100+% Oscars + MSNBC +28% – beat CNN in AM & Prime for - Parks attendance down double digits on both the first month ever coasts; $ spent/visitor weakening + CNBC +20% – remains #1 in business news 2 Broadcast 4 Digital & cost - Local markets not improving + hulu now the #2 video website - Prime ratings down VPY + Reducing costs/workforce … realizing savings + Successful Fallon launch, gearing up for Leno from ‘08 actions +/- Highest rated Super Bowl ever … 1Q profit drag - Economy hitting internet ads +/- TV studio continues to perform on key titles … - Asset write downs but library weakening - ’08 WGA strike benefits not repeating in ’09 Preliminary 2009 first quarter results/23
  24. 24. NBCU 1Q’09 operations & total year 1Q‘09 operational view Remainder of ’09 Positives 1Q‘09 reported $391 (45)% + Cable sub fee growth + Super Bowl 45 +6 + Favorability vs. ’08 Olympics + Film timing/Parks 65 +9 + Film release schedule + Impairments 55 +8 + Full impact of cost actions + ’08 WGA strike +5 Pressures 1Q’09 normalized ~(15)-(25)% ‒ Continued sales pressure (national & local) Operational VPY drivers: ‒ Recessionary impact on DVD catalog & Cable double-digit growth Parks Local market (NBC & TLMD) weakness ‒ Additional asset impairments Parks attendance 1Q’09 operational view a fair baseline for balance of 2009 Preliminary 2009 first quarter results/24
  25. 25. Technology Infrastructure highlights ($ in millions) 1Q dynamics 1Q’09 $ V% Aviation • $5.5B in total orders… equipment backlog $21.6B, Revenues $10,436 -% CSA backlog $56.1B • Revenue growth +12% … equipment revenues Segment profit $1,803 6% +12%, service +11% • Segment profit growth +39% … favorable price, cost productivity, M&A gains Key 1Q business results Healthcare • $3.6B in total orders… equipment backlog $3.1B, Segment CSA backlog $9.2B Revenues profit • Revenues (9)% … equipment (10)%, services (7)% $ V% $ V% • Segment profit (22)% … DI market very tough, OEC shipments will accelerate Aviation $4,817 12% $1,080 39% Transportation • $0.9B in total orders… equipment backlog $2.8B, Healthcare 3,545 (9) 411 (22) CSA backlog $12.2B Transportation 1,171 2 217 (15) • Equipment revenues (1)%, service revenues +5% • Segment profit impacted by new international platform build and loco/adjacency volume mix Mixed environment … aggressive restructuring reducing cost Preliminary 2009 first quarter results/25
  26. 26. Energy Infrastructure highlights ($ in millions) 1Q dynamics 1Q’09 $ V% Energy Revenues $8,239 7% • $6.6B in total orders … equipment backlog $15.6B, CSA backlog $39.8B Segment profit $1,273 19% • Revenue growth +9% … Thermal +55%, Aero +19%, Wind (2)% … services +7% • Segment profit +23% … $216 positive Key 1Q business results value gap & strong base cost control Segment Revenues profit Oil & Gas $ V% $ V% • $1.9B in total orders … equipment Energy $6,941 9% $1,150 23% backlog $6.3B, CSA backlog $3.4B • Revenues +1% … rotating equipment Oil & Gas 1,543 1 179 11 +7%, services (1)% • Segment profit +11% … driven by price & productivity Solid performance in tougher environment Preliminary 2009 first quarter results/26
  27. 27. Operating GE in 2009 Running GE Capital to be safe & secure + Solid funding, $47B total GE cash & $38B GECC tangible equity + Earned $1.1B in 1Q’09, profitable TY’09 + Profitable originations expected to accelerate in 2Q-4Q’09 We have positioned our Infrastructure business to weather the cycle … 1Q’09 segment profit +11% + Services + Stimulus + Organic investment + Backlog + Global position + Cost out/margins Media space is tough … but total year will exceed 1Q run rate Industrial CFOA on plan Committed to transparency & increased disclosure Economy remains tough Places where we can win Positioned for the long term Preliminary 2009 first quarter results/27

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